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G8 leaders close to deal on tax evasion, transparency

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(Globalpost/GlobalPost)

The world's leading industrialised nations were on the verge of striking a deal on Tuesday to crack down on tax evasion and open up information on cross-border finance.

Gathered in Northern Ireland for a summit, G8 leaders were deep in talks aimed at outlining concrete steps their nations can take to fight tax practices which host nation Britain has described as a "scourge".

The moves will target not only illegal tax evasion but also avoidance by multinationals such as Google, Amazon and Starbucks that costs taxpayers billions in lost revenues.

Prime Minister David Cameron has made tax, trade and transparency -- the so-called "Three Ts" -- a key focus of the two-day summit, which has otherwise been dominated by the conflict in Syria.

After on Monday announcing the launch of negotiations next month for a crucial EU-US free trade pact, the focus turned on Tuesday to the other two "Ts".

According to a draft of the final summit communique obtained by AFP, the leaders will agree measures to share information internationally and to each publish national "Action Plans" on corporate ownerships and trusts used to avoid taxes.

"We commit to establish automatic exchange of information between tax authorities as the new global standard," the draft reads, promising to develop a "multilateral model which will make it easier for governments to find and punish tax evaders."

It promises to "rapidly" create a system for "multinationals to report to tax authorities where they make their profits and pay their taxes across the world."

Much of the concern over tax avoidance has focused on big companies which operate legally within the tax system to minimise what they pay: a strategy knows as tax optimisation.

The draft says G8 nations will work on these issues with the OECD, which provided ammunition for an offensive against tax evasion in a report outlining how to bring about automatic sharing of financial information.

The report -- commissioned at the G8's request -- suggests that countries adopt broad, standardised legislation so that bilateral information-sharing agreements can be quickly and easily negotiated.

It warned that without solutions that cross continents, tax evaders will simply move to countries beyond regulators' reach.

-- Global issue needs global solutions --

"Offshore tax evasion is a global issue requiring global solutions," noted the report, "otherwise the issue is simply relocated, rather than resolved."

It also urged countries to look at more than just bank accounts so that people do not simply shift their funds into other assets or vehicles such as trusts.

On Saturday, Cameron strengthened his hand by securing a commitment from Britain's overseas territories, including financial centres such as Bermuda and Jersey, to promote transparency and the exchange of information between tax jurisdictions.

Last year the United States and five European countries decided to move in the same direction by drafting a model agreement based on a 2010 US law.

It obliges all banks automatically to provide US authorities with all information they hold concerning all assets owned by US taxpayers, instead of upon request as was previously the practice.

Several G8 leaders have in recent months taken up the cause of battling evasion, with French President Francois Hollande earlier this year vowing to "eradicate" tax havens.

British Chancellor George Osborne, who joined the leaders for Tuesday's talks, said Britain was hopeful of achieving real progress at the talks.

"I think you are going to see some concrete steps here at this summit to change the rules about tax that have been in place for decades but, as the world has developed, haven't really kept up," Osborne told BBC television.

"As a result, individuals can hide the taxes they are supposed to pay in the international banking system and companies are able to shift their profits around the globe, away from where those profits are actually generated and therefore they don't pay tax."

The G8 brings together the world's leading industrialised countries -- Britain, Canada, France, Germany, Italy, Japan, and the United States -- and Russia.

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http://www.globalpost.com/dispatch/news/afp/130618/g8-leaders-close-deal-tax-evasion-transparency